Hyundai Motor Banks on Hawaiian-Named SUV to Boost Waning Sales

  • Kona is first global compact SUV model in Hyundai’s lineup
  • Hyundai seeing U.S., China decline as consumers favor SUVs

Hyundai Motor Co. is counting on its first global compact SUV model to revive flagging sales after missing out on the popularity of sport utility vehicles in its major markets.

Vice Chairman Chung Eui-sun unveiled the Kona SUV on Tuesday, with a starting price of 18.95 million won ($16,800). The model will begin sales this month in South Korea, followed by North America and Europe, and is expected to compete with the Honda HR-V, Toyota C-HR and Nissan Juke. The automaker plans to introduce several SUV models in various categories and powertrains, it said in a release.

Chung Eui-sun unveils the Kona SUV.

Photographer: SeongJoon Cho/Bloomberg

“The global SUV market is an important market that has shown seven consecutive years of growth,” Chung said in the release. “Rather than hastily entering the market, Hyundai Motor released the Kona after thoroughly analyzing consumers and the market, as well as the technology.” 

Hyundai Motor is playing catchup after being caught out by the shift in consumer preference away from sedans to larger and more expensive SUVs. The Kona, named after the district on Hawaii’s Big Island, is only the third global SUV model in the South Korean automaker’s lineup. The mismatch between demand and supply led to the carmaker last month registering its steepest decline in U.S. retail sales since June 2009, while geopolitical tensions exacerbated the imbalance in China, its biggest market.

“That’s certainly something they need,’’ said Jessica Caldwell, an analyst with in Santa Monica, California. “They could really use not only something in this segment, but just more SUVs period. They’re pretty light on SUVs.’’

Driver Assist

The automaker is extending its driver-assist systems beyond its more expensive models, with Hyundai making the technology available on the Kona that includes features like forward-collision avoidance and lane keeping. The SUV will also have a head-up display that will project a virtual image to enable the driver to keep his eyes on the road.

Kona SUV.

Photographer: SeongJoon Cho/Bloomberg

Hyundai Motor currently has only two crossover models available for the global market, the full-sized Santa Fe and mid-sized Tucson. The automaker also offers a small SUV -- called the Creta in India and ix25 in China -- in selected emerging markets.

The carmaker has plans to expand its SUV lineup to eight models, including two under the premium Genesis brand, by 2020, according to Esther Yim, an analyst at Samsung Securities Co. in Seoul. That should help Hyundai Motor add 500,000 in annual vehicle sales and expand its share of the global SUV market to 6.8 percent, up from 5.7 percent currently, Yim wrote in a May 31 report.

The Kona, which comes in 2-liter and 1.6-liter engine options, will enter a competitive segment marked by increasing sweeteners in the U.S. The automaker’s sales in the world’s second-biggest auto market fell 15 percent in May, dragged down by waning demand for its mainstay sedans. Hyundai Motor’s incentive spending in the U.S. jumped 51 percent to $3,166, according to researcher ALG.

Compact crossover SUVs have been a top-selling segment in the U.S. since July 2016, outselling compact cars and mid-size autos, according to data compiled by Bloomberg.

China Plans

In China, Hyundai Motor and affiliate Kia Motors Corp. are speeding up the introduction of more SUVs to stem declining sales that are blamed in part on the frosty ties between the two countries over a planned U.S. missile-shield.

The China-exclusive ix35 is due to go on sale later this year, while Kia is scheduled to begin sales of its K2 Cross this month. Hyundai Motor also recently hired Volkswagen China head designer Simon Loasby to lead its China design team.

Kona SUV interior.

Photographer: SeongJoon Cho/Bloomberg

At home in South Korea, the Kona will help Hyundai Motor gain a share of the fast-growing vehicle segment, where sales climbed 33 percent in the first four months compared with the 6.3 percent increase in mid- and full-sized sedan deliveries. Ssangyong Motor Co. and Renault Samsung Motors Co. lead compact SUV sales in the country with their Tivoli and QM3, respectively.

“Hyundai was late to catch up a global SUV boom as it settled for its sedan sales,’’ said Lee Sang-hyun, analyst at IBK Securities Co. in Seoul. “It’s a little late, but I think they are in a right direction.’’

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